John R. Graham is a financial, economic, and policy analyst in the health sector. His appointments include:
Senior Fellow of The National Center for Policy Analysis;
Senior Fellow of The Independent Institute;
Senior Fellow of the Pacific Research Institute;
Senior Fellow of The Fraser Institute;
Adjunct Scholar of The Mackinac Center for Public Policy;
Columnist at Forbes.com's The Apothecary blog;
Member of the Board of Visitors of The Benjamin Rush Society of medical students and physicians.

More precisely, of the 189 million Americans with private health insurance coverage, I estimate that if Obamacare is fully implemented, at least 129 million (68%)will not be able to keep their previous health care plan either because they already have or will lose that coverage by the end of 2014. This includes:

9.2 to 15.4 million in the non-group market (my chart uses the lower of these figures)

16.6 million in the small group market

102.7 million in the large group market

Most of these are individuals involuntarily forced to purchase expensive add-ons to their existing plans. But included among these are the many millions now having their non-group policies cancelled along with 5.7 to 35 million who will lose their existing employer-provided plans entirely. Most admittedly will find other coverage, yet out of this group, 1.5 million will become uninsured, along with 2.3 million from the non-group market who likewise become uninsured because they simply cannot afford the expensive Obamacare upgrades. In short, the “vast majority” are not keeping their health plans. Statements to the contrary are flatly untrue.

“I keep playing that over and over in my head: that you can keep your health plan, period,” said Terri Flay, a Manassas, Virginia, woman whose policy is being canceled, referring to Obama’s pledge. “But it isn’t ‘period.’ They put a gun to my head saying that I have to pay more because I need the health-care insurance.”

I’m hoping all readers can agree that for people in Terri’s situation, even though a private insurance company executed the action, the president’s promise was flagrantly broken. It doesn’t mean that Terri will end up uninsured–we can all hope she won’t–but even though she (to all appearances) liked her old plan, Obamacare essentially has taken this away from her. Obamacare’s rules forced the insurer to literally cancel her plan pure, no ifs ands or buts. Even White House spokesman Jay Carney appears to finally have conceded this simple point this week.

Let me be clear that I am not predicting that 135.8 million Americans have or will have their policies cancelled due to Obamacare. But remember the president’s elaboration on his original promise made in a June 23 press conference in response to a question from Jake Tapper:

When I say if you have your plan and you like it, or you have a doctor and you like your doctor, that you don’t have to change plans, what I’m saying is the government is not going to make you change plans under health reform.”

Lest you think I am simply playing “gotcha” with an offhand remark, this was not an idle claim. The president repeated it with even more specificity in his speech to a joint session of Congress later that September (which was merely one of 24 instances in which he made this promise):

If you are among the hundreds of millions of Americans who already have health insurance through your job, Medicare, Medicaid, or the VA, nothing in this plan will require you or your employer to change the coverage or the doctor you have. Let me repeat this: nothing in our plan requires you to change what you have.

No one can honestly look at the long list of mandates included under Obamacare and conclude that these do not require any changes in coverage–sometimes substantial–even for those with existing health plans. And yet Jay Carney said just this week: “Eighty-plus percent of the American people already get insurance through their employer, through Medicare or through Medicaid. They don’t have to worry about or change anything.” This is a flagrant falsehood.

To add insult to injury, Mr. Carney added “it is correct that substandard plans that don’t provide minimum services that have a lot of fine print that leaves consumers in the lurch often because of annual caps, or lifetime caps, or carve outs for some preexisting conditions, those are no longer allowed because the Affordable Care Act is built on the premise that health care is not a privilege, it is a right and there should be a minimum standard of plans available to Americans around the country.”

Here in a nutshell is the problem. The minimum actuarial value established by Obamacare was 60%: that is, plans must cover 60% of covered expenses for a typical plan member, leaving the rest to be paid out of pocket. Yet in 2009, the average actuarial value for a typical employer-based HMO was 93%, while that for a typical employer-based PPO was 80-84%. In contrast, Medicare’s average actuarial value was 76%. The point being that without a shred of the micromanagement now being imposed under Obamacare, the typical employer plan voluntarily was well above the floor set by Obamacare and well above the benefits deemed adequate by the government itself for that single-payer plan known as Medicare. Consequently, it is unlikely that most employers (or their employees) ever viewed their coverage as “substandard.” And candidate Obama certainly did not get elected on a platform of promising to upgrade the lousy health coverage provided by employers.

To take a more concrete example, Medicare prior to Obamacare covered a long list of preventive services, but these were subject to varying levels of cost sharing. A large number of employers did the very same. Who knew Uncle Sam–under the guise of solving the problems of high health costs and 50 million uninsured–would determine this was “substandard” coverage completely unworthy of protection by the president’s pledge? Does anyone recall candidate Obama running on a platform of free preventive health services (including contraception, sterilization and abortifacients) for all? You can rest assured he never would have been elected had he ever been so honest about what he planned to deliver to the American people under the banner of health reform.

In the context of employer-based plans that already were voluntarily providing an AV of 83%, I find it particularly pernicious that the ACA designers nevertheless felt compelled to impose further requirements—free preventive services, for example—essentially saying, “Look, we know your BMW is a very safe and reliable car but we think you need to add this auto-locking system that prevents you from driving your car if you haven’t changed the oil in 3,000 miles. It only adds 1.5% to the cost of your car (you can afford it!) and it will prevent you from getting stuck out in the middle of nowhere and possibly dying because your engine blew up.” In a free country, we shouldn’t have to be worrying about this type of micro-managing of our private lives and decisions. This manifestly is not the role for the federal government envisioned by our liberty-loving Framers (the men who risked their lives, their fortunes and sacred honor to defend their freedom). I feel certain that Patrick Henry did not risk death for the privilege of creating a federal government so powerful that it could force us all to chip in and pay for Sandra Fluke’s contraceptives.

A president who ran on a platform of pledging to fix what was broken and leave alone everyone else who was happy with their coverage surely had no political mandate for the kind of intrusive and expensive changes to health benefits that are now angering tens of millions of Americans. The health law passed with the tiniest of political margins. President Obama’s pledges and assurances were an integral part of securing enough political will to cross the goal line. For that reason, it is important to hold him and his spokesmen to account for the accuracy of their pledges and predictions. Those willing to wallow in the weeds of wonkery that follow can judge for themselves whether I am being too harsh in my criticism of Mr. Axelrod or his former boss.

How Many People Have Private Health Insurance?

Medicaid. The president’s original promise only makes sense in the context of private health insurance. Nobody was worried that this progressive president would take away Medicaid benefits from the 43 million who had such coverage in 2010 or the nearly identical number who had Medicare benefits [1]. Indeed, under the plan finally signed into law by President Obama, fully half the newly covered were expected to obtain that coverage through a massive expansion of Medicaid.

Private Insurance. There are 189 million Americans with private health coverage, including 18.1 million non-elderly with individual (non-group) coverage plus 170.9 million with employer-sponsored insurance (ESI).[3] This is the appropriate denominator to use when assessing the accuracy of either the president’s original promise or Obamacare defenders such as David Axelrod. For simplicity, it’s best to think about 3 broad market segments: non-group, small group (firms with under 50 employees) and large group (firms with 50 or more employees, including health plans for federal, state and local government workers).

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

This is a great article that brings up many good points about the issues many individuals are facing and how they are going to cope with changing plans. I work for a company called ElectiveRx and we provide affordable coverage that qualifies under Obamacare. Many businesses we talk to are worried about the affects the ACA will have on their business (just like individuals mentioned above). Everyone needs to do a cost benefit analysis and decide what is right for them.

Those who have taken Econ 101 understand that if there were a demand for the precise configuration of mandated benefits being imposed under Obamacare, any profit-maximizing insurer would have sensibly trotted out such a policy as this would have ensured a flood of new customers (individuals in the non-group market and health benefits managers/owner-operators in the small group and large group markets) anxious to swap their inferior coverage for this great new product. That individuals and employers had to be forced under penalty of law to swallow this laundry list of new mandates is the first clue that on balance this thicket of new requirements will be welfare-reducing rather than welfare-enhancing. So there obviously will be some who happily pay the higher premiums required to get the enhanced coverage mandated under Obamacare, but I feel certain this does not represent the majority of Americans, especially since public opinion has run against Obamacare since at least 6 months before its enactment.

Chris, thank you for writing this informative article; the way you are comprehensive in describing all aspects of the market (from individual to large group insurance) is telling of a comprehensive analysis.

However, I do think though the way your present the aspect of “not keeping coverage” is stretching the definition. Even employers with over 59 employers are seriously contmplatinv self insuring and then purchasing stopgap coverage. Very few states have taken definitive action towards preventing this.

So if there is a move towards self insurance then to be quite frank few will notice any significant changes to the cost or comprehensiveness of their coverage. Yes reinsurance fees apply, yes lifetime caps are lifited, yes 60% actuarial must be met to avoid the mandate.

But the only aspect of cost increase that I see driving premiums is the increased size and diversity of the risk pool. The actual restrictions on insurance that Obamacare imposes should be limited honestly

Thanks for your comment. If you’re arguing that moving the self-insurance can avert most of the Obamacare regs, my understanding is that this strategy will avoid the medical loss ratio restrictions, but even these plans are subject to preventive services w/o cost-sharing, patient protections and out-of-pocket maximums. The restrictions on medical underwriting and modified community rating, caps on deductibles and EHB only applied to non-grandfathered plans in the small group market, so that doesn’t seem pertinent to employers over 50 workers.

Keep in mind that it’s a principle I’m fighting for, in which case the premium cost impact is less relevant. Stealing a kid’s lunch money is just as offensive as stealing a larger amount even though the latter might be the more egregious violation. The point is we don’t (or shouldn’t) just sigh and said “Oh, well, it’s only $1, get over it.” Stealing is wrong and we should be offended when it happens on any scale. So I don’t really care to have our freedom chipped away in little salami slices as we respond to each offense with “well, they didn’t take THAT much.” A government with the power to micromanage your health benefits–even for those offering what by any standard is a quite generous level of benefits–is a government that might later decide it’s OK to penalize you if you don’t ride an exercise bike for the prescribed length of time each week or eat your broccoli because it’s good for you [I've ranted about this elsewhere: http://www.aei.org/article/scalias-correct-the-slippery-slope-towards-compulsory-exercisescalias-correct-the-slippery-slope-towards-compulsory-exercise/].

What’s offensive about this nanny-statism is not the absolute size of the burden being imposed, but the fact that it signals we have accorded government far too much power over our individual lives and freedom to live life as we choose, taking the risks we want and accepting responsibility for the consequences that might ensue from these. That’s the vision of a night watchman state that I believed fueled the passionate (and quite dangerous) fight for liberty 200+ years ago. It would be a great shame to see that vision eviscerated by a complacent public too tired to fight any more against unrelenting efforts by nanny-staters (however well-intentioned).

One last concrete example of the mentality that permeates Obamacare: here’s Brookings’ Henry Aaron talking about “adulterated” health insurance and patting ourselves on the back for getting rid of this. I’m pretty damned sure 139 million Americans didn’t have “adulterated” health coverage that they needed government assistance to protect them from harm. But try telling that to an unrepentant ACA enthusiast.

Correct me if I am wrong Chris, but Obamacare is encouraging small employers to allow their employees to choose insurance on the small buisness health exchange (SHOP). If insurance is purchased through it, it is fully insured and thus subject to EHB and medical loss ratios and heightened restrictions that can present more of a cost burden to small employers w/ 50+.

“According to the WSJ, In a 2012 study, the Urban Institute found ObamaCare’s incentives will cause as many as 60% of small firms to convert [to self insuring] without regulatory changes.”

I agree in principle that talking about “adulterated” insurance is an aspect that echoes a paternalistic state because it does suggest that Obamacare is the far superior alternative for any one seeking health insurance. I appreciate your writing because its crucial people understand all aspects of the market before passing judgment.

Wow I am sorry, I was refering to under 50, so I guess you are correct that self insuring would be more applicable to those employers with 50+ who are seeking to avoid the strong employer mandate in lieu of the weak.

I misunderstood your comment, as I thought you were talking about self-insurance in the 50+ employer market (where the largest fraction of those adversely impacted by Obamacare currently get their coverage).

Thanks for pointing to the WSJ piece: don’t know how I missed it. I wasn’t aware there was quite that large a trend towards SI for very small employers as the conventional wisdom used to be that it wasn’t a wise business decision in this market as a single $100K “heavy hitter” in a group of 25 would result in the employer shelling out $4k/employee etc. However, I guess the stop-loss market has evolved to take care of this problem, though once an employer buys stop-loss, presumably this trims the normal ROI associated with moving to SI. Nevertheless, I’m not in the position to quibble with Urban Institute’s claim that a large fraction of small employers will be enticed in this direction.

If they do, then I concur SI offers an enormous cost advantage under ACA since it prevents employer from having to meet EHB standards, cap on deductibles and pricing restrictions. So relative to the pre-ACA era, in which the cost advantage of SI wasn’t that great (hence we observe very few small employers in this game), I guess ACA fundamentally transforms the situation. It worries me a bit that what wasn’t a good business decision pre-ACA has been made to be one post-ACA. I fear we may discover small firms are biting off more than they can chew risk-wise will may have adverse unintended ramifications down the road (strapped small firms refusing to pay legitimate medical bills, employees caught in the middle etc.). We’ll see.

As per my previous response, you have nothing to apologize for. I’m the one who misunderstood what you were saying and hence responded accordingly. Hope everything is clear now.

FYI, KFF/HRET employer health benefits survey has a table on self-funding:http://kff.org/private-insurance/report/2013-employer-health-benefits/?special=exhibits [Exhibit 10.1]. It shows that self-funding among what they call small firms (under 200) has been remarkably stable over the past 15 years and currently stands at 16%. So an upward shift to 60% or more would be a sea-change in the SG market. Unfortunately they don’t offer any more fine-grained breakdowns.

Your article is very interesting and informative. Thank you. However, if you are primarily arguing this principle, against universal health care because it is ‘intrusive’ on American’s freedom of choice, do you also object to auto insurance requirements legislated by the government? How about income taxes that which are applied to things to which Americans object? ‘Intrusion’ for the common good is what good government is all about, isn’t it?

The goals of the ACA (however presently flawed it might be) to my understanding are: 1) to provide this rich country with its first universal health care program, 2) to insure that 30-40 million Americans will gain their first access to affordable health care, and 3) to slow the presently spiraling costs of health care in America by providing some less expensive competition.

Given these aims, how can you defend the position it is “less relevant” that “few will notice any significant changes to the cost or comprehensiveness of their coverage”??

Finally, your article title asserts that ‘the vast majority of people are not keeping their plan.’ Isn’t that argument a semantic one? I do not know of any time the president or Axelrod stated that no Americans would experience a cost increase in their plan. As I understand them, the ACA regulations require bear minimum coverage. Most present employer-based plans and federal plans already provide better payment coverage than the minimums now enacted. If some Americans experience cost increases along with improved types of coverage… does that constitute “losing” your plan or is that “changing” your plan, perhaps for the better. Let’s face it, most Americans witness coverage and cost changes to their existing plans every year. I wouldn’t classify those as “losing” their plans. In this respect, I believe Axelrod’s statement is correct.

Of course, there ARE a minority of people who HAVE or WILL lose their plans (the ‘grandfathered’ plans). I believe that is the actual travesty that proves Obama’s statements about “keeping” your plan are incorrect and perhaps worse, intentional lies. But that is Sebelius blunder in the regulations written after the legislation was past. I have to wonder why that can’t be corrected at this time?